Fitch ratings warns NZ energy sector outlook negative

By NZPA

Thursday 1st February 2007

Regulation of energy network businesses is among the many risks facing the New Zealand utilities sector, which has a negative outlook for its credit ratings, ratings agency Fitch said today.

A limited future of gas supply, reliance on hydro-generation, underinvestment in transmission were also problems facing the industry, said Kevin Lewis, director of Fitch's Asia-Pacific Energy and Utilities team.

"While New Zealand's limited future supply of gas remains a concern for gas-fired generators, regulatory risk has become of heightened concern for monopoly network businesses," Lewis said.

"In recent times, the Commerce Commission has clearly demonstrated its willingness to take action to curb what it considers is misuse of market power by utilities with monopoly market positions."

Last year, the commission threatened to take control of Vector, saying the company was overcharging industrial and commercial customers and undercharging others, particularly Auckland residential consumers.

The commission also threatened price controls on Unison Networks, and in 2005 threatened to take control of Transpower's transmission services over what it considered were unjustified price increases.

In addition to the need for further investment in generation, historic underinvestment in transmission constrained the network's growth and created a credit risk for companies reliant on reliable electricity supplies, Lewis said.

Transpower's planned 440 kilovolt line to Auckland got the nod from the electricity regulator yesterday, but it still faces opposition from Waikato farmers.

Comments from our readers

No comments yet